The district court for North Dakota gave substantial deference to a letter written by the Centers for Medicare and Medicaid Services (CMS) interpreting the federal Medicaid statute to contain an age requirement which is not present in the text.
Based on that broad deference, the court rejected the claims of the Center for Special Needs Trust Administration (the Center) against the North Dakota Department of Human Services (NDDHS). Center for Special Needs Trust Administration, Inc. v. Olson, 2011 WL 1562516 (D.N.D. April 25, 2011). The judge was nominated by George W. Bush.
In 2007, Allen Kemmet transferred $54,450 to the Center for Special Needs Trust Administration for deposit into the National Pooled Trust. The purpose of the transfer was to reduce his assets to the point where he would qualify for Medicaid. However, since Congress passed the Omnibus Budget Reconciliation Act of 1993, most transfers to trusts impose transfer penalties to prevent people from transferring their assets in order to qualify for Medicaid. A few kinds of trusts are exempted from the transfer penalties, including a trust known as a “pooled trust” and described in 42 U.S.C. § 1396p(d)(4)(C). The pooled trust allows a disabled individual to transfer assets to a nonprofit association without triggering transfer penalties. Mr. Kemmet’s goal was to transfer his assets into a pooled trust to avoid transfer penalties that would disqualify him from Medicaid.
When NDDHS received his application for Medicaid, an attorney with NDDHS mistakenly recorded Mr. Kemmet’s age as 54 years. In fact, he was 65 or older. The error caused NDDHS to approve his application and not apply any transfer penalties to his transfer of funds to the pooled trust. Mr. Kemmet received care from the Center, and Medicaid reimbursed the Center for the care. Then after his death, NDDHS re-examined Mr. Kemmet’s eligibility for Medicaid and determined he was not actually eligible, based on his age. NDDHS requested the Center to reimburse it for the care the Center provided to NDDHS. The Center and NDDHS brought countersuits against each other disputing the requested reimbursement, and the Center asked for a permanent injunction barring NDDHS from asking for reimbursements for care provided to individuals whose assets were transferred to pooled trusts.
The court first examined whether Center had standing to seek to enjoin NDDHS. NDDHS argued that Center had not suffered any injury and that there was no risk of imminent injury. A claim for reimbursement would be a threatened injury, but in its reply brief, NDDHS withdrew its request for reimbursement. However the court pointed out that nothing would prevent NDDHS from requesting reimbursement again. Since NDDHS withdrew its request after the action started, and it could make a new request at any time, withdrawing the request did not moot Center’s claim, and Center still had standing.
The court next analyzed whether the age requirement that disqualified Mr. Kemmet from receiving Medicaid was valid. The Center argued that there was no requirement in the statute that beneficiaries of pooled trusts be below a certain age. Neither the North Dakota code nor the United States code include an age requirement for pooled trusts. N.D. Admin. Code § 75-02-02.1-31.1; 42 U.S.C. § 1396p(c). NDDHS relied on a CMS letter which interpreted 42 U.S.C. § 1396p(d)(4)(C). The agency’s letter stated that “only trusts established for disabled individuals age 64 or younger are exempt from application of the transfer of assets penalty provisions.”
The court deferred to the agency’s interpretation of the federal statute. It explained that courts must give controlling weight to an agency’s interpretation of its own regulations. The court only scrutinizes the agency’s interpretation to inquire whether the interpretation is plainly erroneous or inconsistent with the regulation. And here, the interpretation was not plainly erroneous, and the court accepted the agency’s interpretation that the exemption for pooled trusts are only available to disabled persons younger than 65.
The cases relied upon by the court all concerned deference to the agency’s regulations. In this case, CMS did not promulgate any regulations. The North Dakota court thus extended deference applied in instances when the agency has published regulations to the situation of the agency not promulgating regulations and simply interpreting the silence of a statute in a letter.
The court next found that the Center’s response to NDDHS’s motion for summary judgment was timely. The court also rejected the Center’s argument that NDDHS waived its right to ask for reimbursements by initially approving the application for Medicaid benefits. States have the right to redetermine individuals’ Medicaid eligibility.
The court turned next to the Center’s argument that NDDHS should be estopped from claiming the pooled trust was improper because it approved the initial application. Under North Dakota law, a party who leads another to believe a particular thing to be true and to act in reliance on that belief cannot later sue the other party because the thing is not actually true. Against a government actor, estoppel only applies if there was affirmative misconduct by the government. Here, NDDHS made a simple mistake about the age of Mr. Kemmet, and the mistake did not rise to affirmative misconduct. NDDHS could not be estopped from its claims.
The court analyzed NDDHS’s argument that the Center failed to allege a violation of a federal right under 42 U.S.C. § 1983. Under Gonzaga Univ. v. Doe, 536 U.S. 273, 279 (2002), Section 1983 actions can only be brought for violations of federal laws that create a private right. The court examined whether 42 U.S.C. § 1396p created a private right enforceable through 42 U.S.C. § 1983. It applied the four part test of Blessing v. Freestone, 520 U.S. 329, 340 (1997). It concluded that a private right may exist, but that even if it did, NDDHS did not violate the statute and thus the Center’s claim is without merit anyway.
Finally, the court rejected the argument that the section of the North Dakota Administrative Code in question was preempted by federal law. It also rejected the parties’ requests for costs and attorney fees. It expressed its impatience with the parties, opining, “The insanity associated with the pursuit of litigation in state and federal court over merely $19,000 boggles the mind of any reasonable person.”